Cord Cutting

May 11, 2016Jay Lee Vertz

From Wikipedia, the free encyclopedia

“Cut the cord” redirects here. For the Shinedown song, see Cut the Cord.

In countries where cable television is prevalent, beginning in about 2008 some people began to get their video entertainment and information solely through Internet sources. In bypassing television, they sought to save money or broaden their choices. This trend was labelled cord-cutting. To address the trend, cable-only channels such as HBO began to offer non-cable options.

In broadcast television, cord cutting, cutting the cord, and cord shaving refer to patterns of viewers cancelling subscriptions to subscription televisionservices, dropping expensive pay television channels or reducing the number of hours of subscription TV viewed in response to competition from rival media.

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Parks Associates estimated that in 2008, about 900,000 American households relied entirely on the Internet for television viewing, and the company expected that number to increase. Leichtman Research Group found that six percent of Americans watched at least one show online each week in 2008, a figure that grew to eight percent in 2009. The number of Americans subscribing to cable service increased two percent in 2008, but the growth had slowed. Sanford C. Bernstein & Co. found that in the fourth quarter of 2008, the increase was seven-tenths of one percent, or 220,000 homes, the lowest ever recorded.[2]

A Centris report showed that 8% of Americans expected to cancel their pay television service by the third quarter of 2009. About half of Americans tried to get a better deal from a provider other than the one they were subscribed to. Amazon.com, Hulu, iTunes, Netflix, and YouTube, as well as BitTorrent, made cancelling service possible for those who would be unable to see their favorite programs over the air. Sports programming was a big reason for not cancelling pay television service, although online options existed for many events. Another problem was the inability to watch many programs live, or at least soon enough in the case of a television series.[3]

Many broadcasters provide programming live to the Web. Here, a LCD TV/monitor displays the Internet along with a television channel within a PiP (Picture-in-Picture) in a corner of the screen.

2010 was the first year that pay television saw quarterly subscriber declines. In the second quarter of 2012, Sanford Bernstein determined that losses took place in five quarters.[4]Leichtman found that the decrease in pay subscriptions was not happening in large numbers. One reason was that some sports events, as well as other types of television (such as series airing on cable-originated networks), could not be seen online. Sanford Bernstein said the number of pay television subscribers increased by 677,000 during the first quarter of 2010, and a poll conducted by The New York Times and CBS News showed that 88% of people surveyed had such a service, and only 15% had considered going exclusively to web services. People under the age of 45, the survey said, were four times more likely to use the Internet only. To combat the trend, pay television providers were allowing people to stream television programs on desktop, laptop and tablet computers. Craig Moffett of Sanford C. Bernstein still stated that high prices and other methods would eventually drive customers away, calling cord cutting “perhaps the most overhyped and overanticipated phenomenon in tech history.”[5]

Comcast reported a loss of 275,000 subscribers in the third quarter of 2010, bringing the total for the calendar year to 625,000. The company said most of these losses were not from people leaving for another service. Moffett pointed out that cable companies needed to offer lower-cost packages,[6] but a survey by Strategy Analytics revealed financial considerations were not the primary reason. People were not satisfied with what they could get, and online sources had a wider array of content. The survey showed that 13% of cable subscribers intended to cancel service in the next year. Slightly more than half were under the age of 40, and nearly all had a high school education. Two-thirds had or planned further schooling, and just over half earned at least $50,000 a year.[7]

In second quarter 2011, Comcast lost 238,000 television customers, compared to 265,000 a year earlier, though the company was making up for these losses with increases in other services such as Internet. Moffett said the slowing rate indicated that online sources were not making people drop cable as quickly. On the other hand, Time Warner Cable and Charter Communications lost more customers in the quarter than in 2010.[8] Time Warner Cable lost 130,000, while Dish Network lost 135,000; by comparison, DirecTV gained 26,000 subscribers, compared to 100,000 the previous year. Nielsen Media Research estimated that the number of households with at least one television set had decreased from 115.9 million to 114.7 million, while also estimating an increase in program viewing by computer, tablets or smartphones. Services such as U-verse were increasing their subscriber numbers by offering special features: U-verse’s “My Multiview” option allowed people to watch four channels at once, while Cablevision‘s “iO TV Quick Views” allowed the display of up to nine channels at once.[9]

A Nielsen report showed that during the fourth quarter of 2011, the number of people paying for television had dropped by 15 million people (a rate of 1.5 percent), and the number of cable subscribers dropped by 2.9 million.[10]

A 2012 Deloitte report said 9% of television households dropped cable service during 2011 and an additional 11% planned to cancel their service.[11] Sanford Bernstein estimates 400,000 dropped pay video services during the second quarter of 2012, up from 340,000 in 2011. One reason for the drop was college students’ returning home for the summer, while the companies made up for the loss in other quarters. However, the number of new homes paying for television service is less than the total number of new homes.[4] Another possible reason is services, such as time shifting and live recording capabilities, that were once exclusive to pay television services, are now being offered to cord cutters.[12]

Although the number of subscribers usually increases in the third quarter, in 2012 only 30,000 people added pay television service, according to a study by the International Strategy & Investment Group. Cable lost 340,000 subscribers (with Time Warner Cable accounting for 140,000 of that number) and satellite gained only 50,000; telephone companies added 320 subscribers.[13]

Throughout 2012, pay television added only 46,000 new subscribers, out of 974,000 new households overall, according to SNL Kagan. 84.7 percent of households subscribed, compared to 87.3 percent in early 2010.[14]

Another category of cord-cutters was labeled by Nielsen in March 2013 as “Zero TV”. In 2007, two million households had neither subscribed to a pay television service or received television programming via antenna. By 2013, this number had increased to five million. Most people in this category were younger and did not have children in the household. People could still view shows via online streaming through services such as Netflix.[15]At the 2013 National Association of Broadcasters Show, the solution for broadcasters was stated to be mobile television.[14]

A 2013 Leichtman survey showed that the 13 largest MVPD companies, covering 94 percent of the country, experienced their first year-to-year subscriber losses. 80,000 subscribers dropped their service in the year ending March 31, 2013. 1.5 million cable customers dropped their service, with Time Warner Cable losing 553,000 and Comcast losing 359,000 subscribers. AT&T and Verizon added 1.32 million subscribers; DirecTV and Dish added 160,000 subscribers, compared to 439,000 the previous year. Before 2013, only quarter-to-quarter losses had been recorded industrywide. Internet video and switching to receiving television programming by antenna were reasons. Bruce Leichtman described the subscription television industry as “saturated”.[16]

A TDG study showed nearly 101 million U.S. households subscribed to television at the industry’s peak in 2011, but the number would fall below 95 million in 2017.[17] In 2013, the number of total subscribers to pay TV services fell by a quarter of a million. This was the first decline from one year to the next.[18]

Some broadcasters have elected to embrace the concept of cord-cutting by establishing subscription-based over-the-top content offerings of their own, such as HBO Now.[19][20] Alongside the 2014 launch of CBS All Access, Les Moonves stated that there was a “very strong possibility” Showtime would also offer an OTT service—a plan which would be realized in June 2015.[21][22][23] On March 31, 2016, Canadian sports channelSportsnet (owned by media and telecom conglomerate Rogers Communications) announced an OTT service offering its four regional feeds and two main national channels.[24]

On November 28, 2011, a report by Credit Suisse media analyst Stefan Anninger said that young people who grew up accustomed to watching shows online would be less likely to subscribe to pay television services, terming these people as “cord-nevers”. Anninger predicted that by the end of 2012, the industry’s subscriber count would drop by 200,000 to 100.5 million; Anninger’s report also stated that consumers were not likely to return to paying for television. In the case of land-line telephones, people had believed younger people would eventually get them, but now numerous subscribers only have mobile phones. Anninger predicted that the same would hold true for pay television, and that providers would need to offer lower-priced packages with fewer channels in order to reverse the trend.[25]

Also using the term “cord-nevers” was Richard Schneider, whose company Antennas Direct was selling antennas through the Internet. After a decade in business, the company was selling 600,000 antennas a year. However, Schneider said some people only knew of the Internet and services such as Netflix and were not even aware broadcast television even existed.[14] In a speech on November 16, 2012, Time Warner CEO Jeff Bewkes said “cord nevers” did not see anything worth paying for.[26]

In an effort to entice cord cutters and cord nevers, some cable television providers have begun offering Internet-only streaming services. Cablevision began to offer “Cord Cutter” packages that include a free digital antenna and access to its Optimum WiFi network, as well as the option to add HBO Now to the service, making it the first ever cable provider to do so.[27]

In 2015, Comcast and Time Warner Cable (TWC) began to trial television services delivered via their managed internet infrastructures; Comcast’s “Stream” service offered access to broadcast networks, HBO, Xfinity StreamPix, and their respective TV Evwerywhere services. Outside of TVE apps, the service can only be accessed via Comcast home internet on supported devices.[28][29] In October 2015, TWC began to trial a service under which subscribers are given a Roku 3 digital media player to access their service via the supplied TWC app, rather than a traditional set-top box. A TWC spokesperson emphasized that this offering would provide “the same TV and same packages delivered to the home today”, but delivered over TWC-managed internet rather than a cable line.[30][31][32]